What is the term for a settlement of differences between opposing sides in which each makes concessions?

• A. Arbitration
• B. Compromise
• C. Mediation
• D. Negotiation

Answer: (C)

The main idea here is a settlement reached when both sides give up something to resolve their differences. That is a compromise. A compromise happens when each party makes concessions so they can meet in the middle and move forward together.

Mediation, by contrast, involves a neutral third party who helps the sides communicate and explore options, but the mediator doesn’t make the concessions or decide the outcome. Arbitration is different because a third party makes a binding decision for both sides. Negotiation is the process of bargaining to reach an agreement; the actual settlement with mutual concessions comes out of that process, and may or may not be labeled a compromise depending on how it’s reached. In this question, the emphasis on both sides giving up something to settle differences points to the idea of a compromise.